The need for engagement – essentially an emotional connection between an employee and his or her job or employer, between a company and its channel partners, or between a company and its customers – might not have been so important twenty years ago. The hierarchal structure of most organizations was a given, employees stayed with their jobs for a lifetime and mass marketing drew in plenty of customers to feed the sales pipeline for everyone along the distribution channel.

Things have changed. The old tools for reaching and building relationships with customers aren’t working as effectively anymore. Traditional markets have become so fragmented that mass marketing is often no longer as efficient as it once was. And the Internet – while a valuable new avenue for communication – has put consumers in the driver’s seat when it comes to determining who they want to listen to or do business with. Today, a growing body of research suggests that by engaging employees in their jobs and work, companies can build a more skilled, creative, and loyal workforce. That, in turn, can go a long way toward building customer satisfaction, customer loyalty, and company profits.

Employee engagement has important implications for brands, as well. “Almost every interaction that a customer has with a product or its message is an element of the brand – and that interaction should fulfill what the customer expects is the brand promise or elucidate the brand promise in some way,” says Don Peppers of the Peppers & Rogers Group, coauthor of Rules to Break & Laws to Follow: How Your Business Can Beat the Crisis of Short-Termism. “And to ensure that you’re fulfilling that promise and meeting those expectations, you have to have employees who are engaged and enthusiastic about their work, have the right training, the right tools and information and the authority to take action – and they also have to be able to sympathize with the customer and make the right decision in every interaction.”

“At the end of the day, the new face of engagement is being driven by customer retention, and the fact that the customer has all of the power,” says Bruce Bolger, President of Selling Communications, Inc.

Defining Engagement

To Tom Miller, President and CEO of The Miller Company, engagement is a lot more than people showing up on time and doing their job. “It’s an employee who interacts with the company, who brings new ideas about how to do the work, who’s willing to train or mentor and be an advocate for the company and the people he or she works with – without necessarily being asked,” he explains.

Mark Schumann, a Managing Partner for Towers Perrin and co-author of Brand from the Inside, puts engagement in these terms: “Every company looks for that ‘something extra’ that will motivate employees to invest themselves in what the organization pursues. This ‘engagement’ of employees is a combination of functional and emotional commitment – the functional commitment to get things done and the emotional commitment to invest ‘something extra’ in the success of the efforts. A company’s brand as a place to work is a critical factor in achieving engagement: it articulates the value proposition the company offers to employees so employees can easily answer the question ‘What’s in it for me to work here?’ The ultimate result of engagement is a workforce committed to achieving real results that can be measured in metrics of financial return, employee turnover and productivity.”

According to Allan Schweyer, Executive Director of the Human Capital Institute, “Engagement affects an organization’s brand in two ways when it comes to recruitment: A company’s employer reputation helps attract good employees through word-of-mouth. Engaged employees are likely to spread positive word-of-mouth and are more likely to participate in employee referral programs, and they’re also far more likely to remain with the organization.” Further, Schweyer says, “Engaged employees are more productive and maintain better customer relationships. It’s critical, therefore, for organizations to nurture an engaged workforce. Selection and training of managers is a key component to this, so organizations focused on engagement need to include manager training on engagement in their talent-development strategies.”

Engagement’s New Face

While there may be a general benefit to having engaged employees – reduced turnover, more customer-focused and satisfied employees, etc. – if engagement efforts aren’t tied to some business outcome, it can end up being a waste of time and effort.

“Engagement has to be for a purpose,” says Rodger Stotz, Vice President – Managing Consultant with Maritz Inc. “Our concept of engagement is that it’s a state of having productive employees who are effectively using their skills, ideas and energy to support a business purpose. And to be productive, they have to have a clear understanding of that purpose – whether it’s customer satisfaction, greater productivity, more new products, whatever. People who are energized with no direction are just whirling dervishes. We don’t want people running around being energized, we want them to be energized and engaged in a particular business objective.”

Stotz suggests that engagement efforts have to look beyond traditional reward and recognition programs to be effective. “Other important factors include management support of the individual, training and giving employees and channel partners the tools and resources they need to do the job,” he says, adding that communication and feedback are also critical elements.

Maritz takes potential clients through a five-step process for creating an engagement program. “Let’s say improving customer satisfaction and becoming more customer-centric were our business goals,” says Stotz. “We would start by collecting meaningful data from the client on the voice of the customer and the voice of the employee. Then we would use that data to engage leadership in the organization in a conversation about what’s the opportunity for them and what they have to do as leaders if they want to become more customer-centric and employee-engaged.”

Once this has been accomplished, Stotz says that message – with appropriate learnings – is conveyed to the organization’s managers and supervisors “so they understand what engagement is, what the data show, what their role is and what’s in it for them as we do this.”

Finally, “we go through a process of improvement and feedback on whatever the metric is – customer satisfaction, productivity, cost, whatever – and tie improvements in that metric to rewards and incentives,” Stotz explains, “and then we look at continuing that process of feedback, recognition and improvement on an ongoing basis.”

A Culture of Engagement

This kind of holistic approach is where engagement is heading as it moves outward from employees to management to channel partners to customers and beyond. The key doing this successfully from a business standpoint is to make sure everyone is on the same page.

“You’ve probably heard the story about three guys working on a rock wall,” says Tom Miller. “The first guy describes his work as hauling stones. The next one says he’s building a wall. And the third one says he is protecting his country. They’re all doing the same work, but each has a different vision and understanding of what that work is.”

That applies very well, Miller says, to the notion of engagement – employee engagement in particular – but it can be extrapolated to customers or to a distribution channel as well. “People doing the same job can have very different motivations, and it’s a company’s job to deepen or strengthen those motivations and connections as much as possible.”

How do you accomplish that? “The biggest tool that a company has to engage employees is the company’s culture – in particular if at its core it really has an intent to value the individuals that come to work there every day, in every way,” Miller says. Other elements that come into play include corporate communications that help people to understand that what they are doing matters to the company, training, and in particular managerial training – “so the people who are the face of the company culture are acting out that culture in a way that they want it to be done.” In general, he says, “it’s your HR policies, comp and benefits, vacation policies, sick leave – all of those are really tools to drive engagement.”

Reward and recognition also play an important part in supporting a culture of engagement. “It’s important to have a system in place that supports the right behaviors throughout the organization,” Miller says. “Because otherwise things just get out of control, and it is very difficult to pin down what that company culture is. Recognition and reward systems serve to support the culture and the behaviors that exist to drive success.

A culture of engagement also supports what Miller calls the “brand continuum.” As he describes it, “the beginning of that brand continuum starts with people who don’t even know about your company – these are your potential employees whom you want to know about your brand. What are you telling them? Then there are people who interview with your company, new hires, and finally your tenured employees, your successful employees. From beginning to end, you want them to be telling a consistent, positive story about your company.”

In the end, Miller says, a culture of engagement also protects a company from its own mistakes. “If a company is well-intentioned and really does want to engage its employees, customers, and business partners and really do value their individual contributions, then virtually any mistake can be forgiven because people are going to see the sincerity and see through the mistakes. It’s kind of like, when you are dating someone and you screw up, you might start looking elsewhere, but if you are married, it’s really got to be a pretty big mistake before your partner gives up on you.”

Critical Components

Internally, HR policies, compensation and benefits, vacation policies, sick leave – all of these things are tools to drive engagement. But the most valuable tool at companies’ disposal is the Corporate Culture, and that, according to Miller, “involves the message that you value each person in your organization. That’s very much a top-down statement, and it means that if your organization hits difficult times, you’re going to have to live that out. Because if you don’t, when your company hits good times again people won’t trust that you really do value them individually.”

Leadership and Mission are additional factors contributing to a culture of engagement. “As the management of your company, if you can orient your company around the mission of always acting in the interests of the customer, always trying to do what’s right and to take the customer’s side, you’ll have a more successful company,” says Don Peppers. “When you’re engaged in trying to accomplish a mission, you’re more likely to be an engaged employee.”

For employees to feel valued, they need to be equipped with the tools and skills necessary to fulfill their roles. That means Training and Development are important contributors to engagement. “You have to have some kind of learning management system or some profile of success to make sure employees are equipped to handle their job or task – the skills, the knowledge and any other resources that are necessary,” says Doug Press, President and CEO of The Incentive Group. “There’s nothing worse than having someone who’s deeply committed but inadequately knowledgeable or otherwise under-resourced. That person is like a loose cannon – totally motivated, but possibly creating a poor customer experience or spreading misinformation about the brand.”

Companies can also contribute to engaging their customers by Training their Customers – i.e., providing useful, objective information to customers that fosters an understanding of your product or service and how it can help them.

The most important part of engagement, says Jeff Grisamore, President of EGR International, is Communication – more specifically, creating a strategy that opens up and nurtures two-way communication with employees, channel partners and customers. “In order to get people engaged and aligned, the first thing you have to do is find out who they are, what they are like, what works for them, what doesn’t work for them and what their aspirations, goals and challenges are – that sort of thing,” he says, echoing Maritz’s Rodger Stotz. “Only by having that can you then create some sort of engagement strategy. The best companies do that very well.”

In order to engage someone, Grisamore suggests, “you have to spend a lot of time getting to know that person and communicating to them about things that are relevant to them – getting to know them on a personal level, as opposed to offering some sort of a reward and recognition structure.” And that applies whether you’re talking about employee engagement or channel partners. “Everyone is literally engaged on the same points and with the same strategies and the same objectives – and that results in a really consistent, coherent, product and service delivery,” he says. “Once we get an understanding of who these folks are, and once we establish a dialog with them, then we try to deliver to them – without strings – the ideas, resources and tools they need to be successful in their lives, careers, or businesses. It has to do with understanding and connection.”

Motivation and recognition can be part of an engagement strategy, but it’s rarely the most important part. “It varies by company,” Grisamore adds. Sometimes it can be a bigger part, sometimes it can be a significant part, but it’s never the whole part – and in some cases it’s a very small part.”

Pluses and Pitfalls

Of course, with more components, more touchpoints and more players involved, there’s also more of a chance that engagement efforts can go wrong. “Engagement efforts that are poorly designed, not tailored to meet clearly articulated objectives, don’t resonate with the audience, exclude important contributing members in the participant group, are poorly communicated, are not measured or analyzed along the way, aren’t tied to specific behaviors and outcomes, and aren’t supported and reinforced by senior leadership – are doomed to underperform or even fail altogether,” says Michelle Smith, VP of Business Development for O.C. Tanner and President of the Forum for People Performance Management and Measurement.

But while there are pitfalls and risks, the benefits are great, and rewards and recognition can play a significant part in fostering true engagement. In fact, she says, “the best way to integrate traditional reward and recognition programs into a company’s engagement efforts is to do more of them. Rewards and recognition have proven to be essential drivers of employee engagement. It would be foolhardy not to take advantage of such an effective tool and employ it liberally when working to solve many of the challenges facing businesses today.”

Smith offers the example of two transportation companies that were part of the discussion at the Forum’s Think Tank event this year. “The topic was the rising cost of fuel and how they were addressing the problem,” Smith recalls. “One company was cutting routes and seriously contemplating layoffs to reduce expenses. The other company created an employee incentive program encouraging staff to be more mindful of driving and braking practices that were known to reduce fuel consumption and extend the lifespan of equipment. The incentive increased awareness in the use of these best practices and ended up saving the company over a million gallons of fuel per day.”

More importantly, Smith adds, “The program more than paid for itself and converted a challenging problem into a culture-building opportunity where employees could contribute to the solution and take great pride in their results.”

Summing up the essence of the New Face of Engagement, Smith asks: “Which company would you rather work for – and which do you think has the better chance of being around ten years from now?”

Engagement by the Numbers…

A recent BlessingWhite study found that there’s a clear correlation between engagement and retention, with 85% of engaged employees indicating that they plan to stay with their employer for at least the next 10 months.

Towers Perrin found that high-engagement firms experienced an earnings-per-share (EPS) growth rate of 28%, compared with an 11.2% decline for low-engagement firms.

Gallup research indicates that public organizations ranking in the top quartile of employee engagement had EPS growth more than two-and-a-half times greater than organizations that were below average.

Data from Best Buy show that stores where employee engagement increased by a tenth of a point (on a five-point scale) experienced a $100,000 increase in annual sales.

JC Penney has found that store with top-quartile engagement scores generate roughly 10% more in sales per square foot than average and 36% more operating income than similar-sized stores in the lowest quartile.

A Manpower survey of call center customers and employees revealed that centers with high employee satisfaction also have high customer satisfaction, whereas centers with low employee satisfaction have low customer satisfaction.

A report by the Society for Human Resource Management (SHRM) estimates that by strengthening engagement, MolsonCoors saved more than $1.7 million in one year – citing one example where the average cost of a “safety incident” for an engaged employee was $63, compared with an average of $392 for a disengaged employee.

Gallup research has also shown that engaged employees are more productive, profitable, safer, create stronger customer relationships and stay longer with their company than less engaged employees.